“We have subsidized oil companies for a century. That’s long enough. It’s time to end the taxpayer giveaways to an industry that’s rarely been more profitable, and double-down on a clean energy industry that’s never been more promising.”
–President Barak Obama’s 2012 State of the Union

To John Felmy, chief economist at the American Petroleum Institute, those are fighting words. “Taxing one industry to benefit another doesn’t work,” Felmy said in an interview in Denver.

At issue are a suite of tax treatments that the oil and gas industry have come to rely on, such an expensing intangible drilling costs and depletion allowances, accounting for costs of geological and geophysical analysis and a manufacturing tax credit.

Intangible drilling costs really aren’t intangible – they are the incidental costs of preparing a site, grading, drainage, salaries, etc. Depletion allowances enable an operator to account for the decline in a reserve.

“Sometimes it’s a question of whether something is expensed or capitalized,” Felmy said. “It isn’t a question of the federal government getting or not getting its money. It is just a question of when.”

“The oil industry hasn’t gotten any more than other industries,” Felmy said.

“You can’t say it’s fair to take money from a grandmother who has her savings in oil stocks or to raise the price of fuel for consumers,” Felmy said.

But a study by Nancy Pfund and Ben Healey, entitled “What Would Thomas Jefferson Do?” tried to sum-up who has gotten what in the energy industry.
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Pfund and Healey calculated that since 1918 the U.S. government has given $670 billion in energy industry subsidies, with two-thirds going to the oil industry. The study calculated that:

• Between 1918 the oil and 2009 the oil and has industry received two-thirds of the total or $447 billion.
• Between 1947 and 1999 the nuclear industry received $185 billion.
• Between 1980 and 2009 biofuels received $32 million.
• Between 1994 and 2009 renewable energy got $6 billion.

Pfund and Healey contend that oil and gas are the old and heavily subsidized energies and that more incentives have be placed on clean energy technologies, which have received far less in the way of government support.

“On a BTU (British Thermal Unit) basis those subsidies to the oil industry remain the cheapest,” Felmy counters. And he adds that wind and solar aren’t going to fill drivers’ gas tanks.

“The real problem is that this issue is so complex that no one has a clear idea of what we are giving to these industries,” said Michael Livermore, director of New York University’s Center for Policy Integrity.

In an effort to get a handle on those dollar figures, the Center has launched the Energy Tax Breaks Wiki. “The aim is bring together economists, lawyers,” Livermore said. “We want to reach the broadest community.”

The ultimate aim of the wiki is to determine “to what extent we are subsidizing these industries,” Livermore said. The page is still a work in progress, but the first thing a viewer notices is that the oil and gas industry has the longest list of credits and deductions.